Yildirim v. Tarion Warranty Corporation
CITATION: Yildirim v. Tarion Warranty Corporation, 2019 ONSC 945
DIVISIONAL COURT FILE NO.: DC-506/16
DATE: 20190207
ONTARIO
SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
KARACA YILDIRIM Appellant
– and –
TARION WARRANTY CORPORATION Respondent
Simon van Duffelen, lawyer for the appellant Michael Owsiany, lawyer for the respondent
HEARD at Toronto: January 29, 2019
F.L. Myers J.
The Appeal
[1] Mr. Yildirim appeals the decision of Deputy Judge Wheatly of the Toronto Small Claims Court dated September 20, 2016. The Deputy Judge held Mr. Yildirim liable to indemnify Tarion for approximately $17,000 that it paid to the purchaser of a new house. Tarion made the payment under the Ontario New Home Warranties Plan Act, RSO 1990, c O.31, to compensate the purchaser for deficiencies in the construction of the house. Mr. Yildirim sold the house to the purchaser. As the vendor under the statute, Mr. Yildirim was held liable to indemnify Tarion for the amount that it paid the purchaser due to the deficiencies in the house that he sold.
[2] Mr. Yildirim asks that the judgment against him be set aside and Tarion’s claim against him be dismissed with costs. In oral argument, counsel limited the grounds for appeal essentially to one issue. He argued that Tarion is not entitled to indemnification from Mr. Yildirim because it failed to give him notice of its initial decision to make a payment under the statutory scheme. By failing to give him notice of its decision, Mr. Yildirim submits that Tarion deprived him of his right to contest the decision before the License Appeal Tribunal. Mr. Yildirim asserts that he had a statutory right to contest Tarion’s decision to pay the purchaser and to dispute before the LAT both the propriety and the amount of the payment for which Mr. Yildirim has now been held liable.
[3] For the reasons that follow, the appeal is dismissed.
The Facts
[4] The facts are not in dispute and are not especially germane. Mr. Yildirim built a house intending to rent it out as an income property. For reasons of his own, he changed his mind and sold the house. Prior to making the sale, Mr. Yildirim did not register with Tarion as a “vendor” as required by the statute. He was found guilty of a provincial offence for failing to do so. He does not contest therefore that he is a “vendor” to whom the statute applied.
[5] The purchaser of the house sought recovery under Tarion’s statutory warranty scheme for construction deficiencies in the house. Tarion accepted the claim, paid the purchaser the amount it determined was required to correct the deficiencies, and then sued Mr. Yildirim to recover the funds that it paid to the purchaser.
The Issue
[6] When Tarion makes a payment to a house or condominium owner or purchaser under the statutory warranties plan, Tarion is entitled to be indemnified for any loss that it or the guarantee fund suffers “by reason of any registrant’s failure to diligently perform…all obligations imposed under the Plan.” RRO 1990, Reg. 894, s.4.[^1]
[7] In order for Tarion to become entitled to indemnity from Mr. Yildirim, under the terms of s. 4 of the regulation, Tarion was required to establish that Mr. Yildirim had failed to diligently perform the obligations imposed under the warranties plan. The quality of the construction of the house and the value of deficiencies recognized and paid to the purchaser by Tarion were the focus of the trial below. Mr. Yildirim argues that he ought to have received notice and been entitled to contest Tarion’s decision to pay the purchaser before the LAT before instead of being faced a fait accompli in a Small Claims Court action. He argues that his entitlement to contest the initial decision to pay the purchaser was a condition precedent to any liability to indemnify Tarion for the payment that it made.
[8] The question raised in this appeal then, is whether Mr. Yildirim, as vendor, was entitled to notice of Tarion’s decision to pay the purchaser and to contest that decision before the LAT. The issue raised turns on the interpretation of the statute. This is an issue of law on which the Deputy Judge’s decision is reviewed for correctness and without deference. Housen v. Nikolaisen, 2002 SCC 33.
The Decision of the Deputy Judge on the Issue
[9] The Deputy Judge held that Mr. Yildirim was not entitled to notice of Tarion’s decision to pay the purchaser or to contest that decision before the LAT. The Deputy Judge based the decision on a document entitled “Tarion Builder Bulletin” that can be found on Tarion’s website. According to Tarion’s bulletin document, only home owner claimants are entitled to contest Tarion compensation decisions at the LAT. If builders and vendors feel aggrieved by Tarion’s decisions, Tarion has provided an arbitration process in which such issues can be resolved.
[10] Tarion’s view of the statute is an indication of its practice. But it is not a binding legal interpretation. Tarion’s counsel was not able to point to any statute or regulation that provides for a separate arbitration mechanism for builders and vendors who feel aggrieved by Tarion’s decisions.
The Duty of Fairness
[11] Subsection 16(1) of the statute provides that where Tarion makes a decision to pay or refuse a claim for compensation under s. 14 of the statute, Tarion is required to serve notice of its decision “on the person or owner affected.” The rest of s. 16 provides that the person or owner who receives a notice is entitled to a hearing before the LAT.
[12] Mr. van Duffelen argues, with much force, that as a person who is ultimately going to be responsible to indemnify Tarion for the amount that it decides to pay to the purchaser, Mr. Yildirim is obviously a “person…affected” by the decision As such, Mr. Yildirim argues, the statute entitles him to notice and a hearing before the LAT.
[13] I have little doubt that the vendor or builder whose work is at issue and who may ultimately bear the economic cost of Tarion’s decision to pay a warranty claim to an owner or other claimant has a tangible economic interest, if not a legal interest, in Tarion’s decision. At common law, such a vendor or builder has an understandable basis to argue that the duty of fairness entitles them to notice as persons affected by an administrative decision.[^2] But as discussed in Baker v Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 SCR 817, at para. 24, the terms of the statutory scheme are an important determinant of applicability of any duty of fairness. See also Wareham v Ontario (Minister of Community ad Social Services) (2009), 2008 ONCA 771, 93 OR (3d) 27 (CA) at para. 27.
Statutory Interpretation of the word “Person”
[14] In this case, in my view, the proper interpretation of the statute under the modern approach to statutory interpretation drives both the outcome of the question of law and the assessment of any applicable duty of procedural fairness. Assessed in accordance with the purposes of the statute, the words used in s. 16, and the words used in surrounding provisions of the statute, I agree with Mr. Owsiany’s submission that the legislation does not intend builders or vendors to be part of the decision-making process as between Tarion and consumer claimants. In fact, one of the important purposes of having a warranty scheme is to enable consumers to obtain compensation without becoming bound up in protracted and expensive litigation with the vendor or builder responsible for the defects in construction.
[15] Under the statute, the consumer deals with Tarion. Tarion tries to get the builder or vendor to satisfy the consumer’s claims. There are notice periods provided for the builders and/or vendors to try to work through the issues with the claimants. Tarion may convene conciliation processes to formally encourage settlement among claimants and builders and vendors. But, if there is no settlement between the builder/vendor and the consumer, the scheme calls for Tarion to make an independent assessment of the quality of work and the value of any reparations due to the claimant.
The Words use in the Section and in the Statutory Context
[16] The decision referred to in s. 16 is a decision to pay or refuse to pay a claim made under s. 14. Subsection 14(1) of the statute makes it clear that claimants do not have to be home owners but can include a “person who has entered into a contract to purchase a home from a vendor.” Subsection 14(3) discusses other persons who may also become entitled to make claims.
[17] The word “person” as used in sections 14 and 16 refers only to the claimants in my view. Subsection 16(1) speaks of providing notice to the singular person or owner affected by the decision. If the legislation intended the hearing before the LAT to be a multiparty affair as of right, s. 16(1) would be phrased in the plural. Subsection 16(4) provides that only Tarion and the claimant are parties to the proceeding as of right. The LAT has the authority to add other parties in its discretion. I agree with Mr. Owsiany’s submission that the statute starts from the premise that builders and vendors have no part of the compensation claims process. An owner or person with a claim advances the claim against Tarion and the guarantee fund. Tarion adjudicates the claim and makes a decision under s. 14. Section 16 then requires Tarion to give notice to the “person or owner affected” i.e. the claimant, who is then given a right to a hearing before the LAT if she is dissatisfied.
[18] This view is bolstered by other sections like section 17 of the statute which provides for conciliation between owners and vendors. The statute throughout uses the terms “vendor” and “builder” when it intends to refer to those capacities.
The Purposive Approach
[19] The statute is remedial legislation. It is to be given a fair and liberal interpretation. Mandos v Ontario New Home Warranty Program, 1995 3158 (ON CA). In Ontario New Home Warranty Program v Lukenda, 1991 7167 (ON CA) the Court of Appeal held:
The major purpose of the Plan Act is to protect purchasers of new homes by requiring that vendors and builders be screened for financial responsibility, integrity and technical competence. To assure the public protection, it provides warranties, a guarantee bond and compensation in the event of loss by a purchaser resulting from dealings with a registrant. In order to effect this purpose of the Plan Act, a broad and liberal interpretation of its provisions is appropriate.
[20] It may seem restrictive rather than large and liberal to interpret the word “person” in s. 16(1) of the statute to exclude vendors and builders and to include only the claimant. However, this approach adopts a meaning that fairly promotes the purposes of the legislation. As discussed in Lukenda above, the statute takes away the need for consumers to have to chase and sue their builders or vendors when confronted with construction deficiencies. Rather, they can rely on “warranties, a guarantee bond and compensation in the event of loss.” Injecting the vendor or builder back into the statutory compensation process undermines the principal consumer protection benefit of the third-party payer regime. The interpretation that Mr. Owsiany argued for powerfully and which I adopt, is large and liberal in the sense that it advances and protects the underlying statutory purpose to help consumers obtain compensation as quickly and affordably as possible.
[21] Mr. Owsiany submits that under the statute consumers deal with Tarion; Tarion then deals with the builders or owners by way of indemnity, subrogation, registration conditions, or otherwise. I agree.
[22] Vendors and builders have recourse against Tarion if and when they are called upon to indemnify it for a payment made under s. 14. First, if an arbitration process is agreed upon or is built into registration documentation and is thereby mandatory, that would be one route. Second, if the deficiencies prompt Tarion to raise issues or impose conditions on registration or renewal for a registrant or a proposed registrant, s. 9 of the statute provides a separate hearing and administrative process to resolve those issues including a possible hearing before the LAT. Neither of those options applies here. However, as discussed above, the terms of the indemnity under s. 4 of Reg. 894 provide that for Tarion to obtain indemnification it must establish the vendor’s or builder’s breaches of its obligations. The vendor does not go to the LAT to defend itself from indemnity claims. Rather, Tarion has to go to court – in this case the Small Claims Court - where the burden lies squarely upon Tarion to prove the vendor/builders’ lack of diligent performance both in substance and quantum. And that is what happened in this case.
[23] I do not agree with the argument that since Tarion has already made a payment, the defendant in court is facing an unfair burden. It was open to Mr. Yildirim to defend his work and to attack the quantum paid by Tarion as excessive in the circumstances and he did so. The Deputy Judge rejected his evidence and arguments on both points in the main. There is nothing unfair about requiring Tarion to prove the case on the merits against a vendor or builder in a court of law.
OUTCOME
[24] In my view neither the statute nor a duty of fairness provided Mr. Yildirim with a right to notice of Tarion’s decision to pay the purchaser or to contest that decision before the LAT. Moreover, there was no condition precedent to Tarion’s enforcement of its indemnity apart from the requirement set out in s. 4 of Reg. 894 for Tarion to prove that Mr. Yildirim’s lack of diligent fulfillment of his statutory and regulatory obligations caused it loss in the quantum claimed.
[25] Accordingly, the appeal is dismissed.
[26] Counsel agreed that costs would be awarded to the successful party in the amount of $5,000. Therefore, Mr. Yildirim is ordered to pay the costs of the appeal on a partial indemnity basis to Tarion in the amount of $5,000 all-inclusive.
___________________________ F.L. Myers J.
Date of Release: February 2, 2019
CITATION: Yildirim v. Tarion Warranty Corporation, 2019 ONSC 945
DIVISIONAL COURT FILE NO.: DC-506/16
DATE: 20190207
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
KARACA YILDIRIM Appellant
– and –
TARION WARRANTY CORPORAITON Respondent
REASONS FOR JUDGMENT
MYERS J.
Date of Reasons for Judgment: February 7, 2019
[^1]: Mr. Yildirim did not argue that the indemnity was inapplicable to him because he was not a “registrant.” That would have been trying to take advantage of his own breach of the statute to avoid the obligation to indemnify Tarion and leave him, as a wrongdoer, arguing that he was entitled to be treated better than someone who complied with the law. Tarion Warranty Corporation v 1518162 Ontario Inc., 2015 ONSC 6532 at para. 54.
[^2]: Tarion is not a government entity. It is a self-funding body exercising a statutory mandate. I am not considering whether it enjoys statutory powers of decision nor am I making any conclusion about the nature of review from Tarion’s decisions generally apart from the issue under s. 16 raised in this appeal.